ROLE OF FINANCIAL MANAGEMENT
– Financial management is one of the functions of management
– Financial management is concerned with
o Profits and losses of operations
o Control over funds
o Ensuring appropriate cash flow is available
o Chas management
o Raising funds / controlling internal funds
o Investment of funds
o Cost control / pricing
o Forecasting / measuring financial performance against expectations
– Accounting is a subset of financial management. Financial transactions must be recorded,
classified, stored and eventually reported to the managers.
– OBJECTIVES OF FINANCIAL MANAGEMENT
o Liquidity Refers to cash reserves being held, or to the ability to turn and investment into
cash with little or no delay or loss of capital
o Solvency Refers to a business ability to pay its debts when due, and remain a going
concern
o Profitability Refers to how profitable the business is from the perspectives of profit on
sales, assets and shareholders equity
o Efficiency Examines how well working capital is managed, that is how quickly cash is
collected from debtors, inventory sold and creditors paid.
o Growth Once a business is formed and operations commence, it enters a growth phase,
where there should be an increase in the number of goods or services sold
– THE PLANNING CYCLE
o Strategic or corporate plans involve how the business can accomplish its objectives,
generally to create a strong competitive advantage
o Organisational planning processes involve
The formulation of mission, goals and objectives,
An analysis of key environmental variables that present opportunities, threats, and
constraints. It is known as an environmental audit
